Beijing's Public Hospital Reform Signals Market-Oriented Healthcare Transformation

On March 16, 2016, Beijing Municipality released the “Implementation Plan for the Comprehensive Reform of Urban Public Hospitals in Beijing” (hereinafter referred to as the “Reform Plan”), which struck like a bombshell, blasting open the process of public hospital reform. With the breach made, strong winds are imminent.

The Reform Plan outlines five key measures:

First, the fragmented management structure of public hospitals in Beijing will gradually come to an end, with all tertiary, secondary, and primary public hospitals within the administrative region included in the reform.

Second, the reform of the compensation system is gradually becoming clearer, with the implementation of an annual salary system for hospital directors;

Third, the bianzhi system is gradually being phased out, and the interest structure underlying it is being adjusted;

Fourth, Beijing aims to establish a localized, industry-wide medical management system for the capital, fulfill governmental responsibilities in healthcare provision, implement the separation of regulation and operation, and uphold the independent legal entity status of hospitals.

Overall, the reform plan for public hospitals in Beijing is clear, systematic, and implemented in a single comprehensive step.

"Implementation Rules of the Reform Plan" include: 1. Complete separation of pharmaceuticals and medical services; 2. Abolition of public institution staffing quotas, transforming physicians into social professionals; 3. Hospital directors to serve as CEOs equivalent to those in state-owned enterprises; 4. Increase in pricing for technical medical services; 5. Negotiable pricing for public hospital services, with most prices deregulated and left to market forces; 6. Encouragement of the use of domestically produced medical consumables; 7. Support for private healthcare institutions to join medical consortia; 8. Promotion of tiered diagnosis and treatment; 9. Expansion and improvement of the standardized residency training system.

The “Reform Plan” makes significant progress in multiple areas and will have a major impact on healthcare reform and internet-based medical services. Professor Ma Baolin, Chairman of Beijing Xingshantang Cardiac Specialty Medical Group and founder of Xingshantang Cardiac Specialty Clinic, released his own civilian healthcare reform proposal on March 7, 2009—one month before the national healthcare reform—and submitted it to senior leadership through delegates to the “Two Sessions” from the pharmaceutical and medical sectors. The current healthcare reform plan is nearly identical to the one Professor Ma wrote seven years ago. In light of this, VCBeat conducted an exclusive interview with Professor Ma to hear his views on the “Reform Plan” recently introduced in Beijing.

The Healthcare Market Will Become More Market-Oriented

This round of healthcare reform is being advanced simultaneously in Beijing and Shenzhen, with practical significance comparable to a nationwide coordinated effort. Ma Baolin provided a sixteen-character overall assessment: “Aligning with the times, respecting facts, acting decisively, and implementing pragmatically!” Ma Baolin believes that the underlying essence is that the once-lagging healthcare reform process has begun to break free from constraints and shackles, moving toward a more open, market-oriented direction.

Regarding the implementation of market-oriented reforms in the healthcare sector, many people worry about potential chaos. Ma Baolin stated bluntly that over the past three decades of reform and opening-up, the public has observed a consistent pattern: sectors dominated by monopolies have underperformed, while those left to market forces have thrived. The healthcare industry is no exception.

Ma Baolin pointed out that the current healthcare system is fraught with significant problems, leaving all stakeholders—government, health insurance providers, physicians, patients, and pharmaceutical companies—dissatisfied. The situation has become so chaotic that it is difficult to imagine further deterioration. Before the 1980s, doctor-patient relationships were harmonious; the intensifying conflicts in recent years have accumulated over the past three decades. The root cause lies in the lack of openness and the insufficient implementation of market-oriented reforms.

The Reform Plan explicitly proposes advancing the separation of medical services from pharmaceutical sales, which will significantly impact the revenue structures of hospitals and pharmaceutical manufacturers. Ma Baolin believes that this separation will make it more convenient and affordable for patients to purchase medications. Hospitals will no longer be able to rely on drug sales for profit, prompting them to focus on technological advancement, thereby naturally improving the quality of medical services. Pharmaceutical companies will also face less strain in selling their products, as the current multi-layered distribution channels—akin to toll booths on a highway where fees are paid at each checkpoint and profits depend on overloading despite the risk of fines—will be eliminated. In the future, centralized or joint procurement by hospitals will remove these intermediate barriers, which is beneficial for the long-term development of pharmaceutical companies. However, Ma Baolin also points out that the separation of medical services from pharmaceutical sales will be detrimental to substandard enterprises lacking high-quality drugs. Additionally, the role of medical representatives will undergo a fundamental transformation.

The Return of Physician Value

Chinese physicians have long enjoyed the enviable status of being “within the system.” If, as proposed in the current Reform Plan, doctors become independent social practitioners rather than state-affiliated employees, will the medical profession descend into chaos? And where should their career development head? Ma Baolin argues that even if doctors become independent practitioners, they remain Chinese citizens subject to national laws, industry standards, and professional ethics. Ma further points out that chaos did not ensue after the reform of state-owned enterprises, nor did it arise when lawyers transitioned to private practice. Why, then, should doctors be any different? If some individuals do engage in misconduct, this stems from their inherent character flaws; such behavior would occur regardless of whether they hold established positions within public hospitals. Much like criminal offenders—who may include idle members of society, high-ranking officials, or ordinary office workers—the likelihood of committing crimes is not inherently tied to one’s status inside or outside the state system.

Ma Baolin also believes that, in the future, physicians will make a living based on their clinical skills—specifically, their ability to treat diseases effectively. A physician who does not order excessive diagnostic tests, prescribe unnecessary medications, or publish SCI-indexed papers, but excels at treating patients, possesses true professional competence. This is precisely what customers (patients) need. The current healthcare reform is moving in this direction. Therefore, physicians should move forward unburdened, focusing on honing their clinical expertise without worrying about other factors. Competence will attract patients, and competence will lead to high income.

For a long time, various hospital service fees have been strictly controlled. The recent "Reform Plan" proposes raising the prices for technical services and allowing negotiable pricing in public hospitals. How should this be interpreted? Ma Baolin cites radiofrequency ablation surgery, a procedure with which he is familiar, as an example. Excluding the cost of consumables, the fee paid for the surgeon’s technical work amounts to no more than RMB 1,000. In contrast, unskilled construction workers currently earn approximately RMB 300 per day. Moreover, the physical demands of radiofrequency ablation are no less strenuous than those of construction work. Surgeons must wear lead aprons weighing dozens of jin (approximately several kilograms), endure prolonged periods without eating, drinking, or using the restroom, and remain standing throughout the procedure, which can last over ten hours. Furthermore, such procedures typically involve not just a single individual but an entire medical team.

Ma Baolin posed a counter-question regarding the current healthcare system: if technical service fees are not increased, physicians feel undervalued, yet patients still incur substantial costs. Shouldn’t this be reformed?

The Reform Plan also specifically mentions support for social medical institutions to join medical consortia and the tiered diagnosis and treatment system, which may bring considerable impact to the mainstream healthcare system. Ma Baolin supports this view. He believes that whether in public hospitals or social medical institutions, doctors are all trained by the state and should be treated equally. Medicine has its particularities: if you cannot treat a condition but I can, you refer the patient to me; if I cannot treat it but you can, I refer the patient to you. Regardless of whether they are state-owned or private, Chinese doctors serve Chinese patients. The money ultimately belongs to the state; private institutions not only pay taxes but are also major taxpayers, so they deserve support. Ma Baolin stated that the tiered diagnosis and treatment system should be vigorously promoted. Decades ago, China’s healthcare system operated on a tiered model, but the gradual decline of village doctors and county hospitals became an important reason for the increasingly prominent doctor-patient conflicts.

(Author Profile: Ma Baolin is a practitioner of traditional Chinese medicine (TCM) from a family lineage, holds a Master’s degree in Western medicine, and studied under Professor Hu Dayi. He formerly served as a physician at the Heart Center of Beijing Chaoyang Hospital. Currently, he is the Chairman of Xingshantang Cardiac Specialty Medical Group, Founder of Beijing Xingshantang TCM Cardiology Clinic, Committee Member of the Professional Committee on Prevention and Rehabilitation of Cardiovascular Diseases with Integrated Traditional Chinese and Western Medicine under the China Association for Promotion of Traditional Chinese Medicine Research, Vice President of the Health and Public Communication Branch of the China Folk Traditional Chinese Medicine Research and Development Association, and Executive Dean of the Beijing Double-Heart Medical Research Institute.)